The Reserve Bank of India (RBI) has recently clarified that banks and other entities cannot cite its 2018 order on virtual currencies as it has been set aside by the Supreme Court of India in 2020. It, however, said the lenders must follow other routine due diligence measures.
The clarification comes as a relief for crypto investors who have been dealing with a lot of confusion and uncertainty in India. The general public misconception has been that holding or dealing with cryptocurrencies in any way is illegal in India.
Earlier, several banks had issued orders to their customers, asking them not to invest in cryptocurrencies, citing the 2018 order by the central bank. However, the RBI has clarified that as of now there is no ban on cryptocurrencies, and thus individuals holding or trading in cryptocurrencies and crypto businesses enabling this do not violate any policy.
According to Asheeta Regidi, Head, Fintech Policy, Cashfree, the latest RBI notification brings some respite for the crypto industry.
“The mention of due diligence procedures clarifies that banks can choose to service such individuals with suitable risk mitigation measures in place,” Regidi said.
While the notification does not specifically discuss other crypto service providers, Regidi said that not allowing this would be a contradictory stand.
“An express clarification from the regulator on this as well will be welcomed, which will greatly ease banks and other service providers providing financial services essential to the crypto industry,” she stated.
Despite the SC setting aside the 2018 circular of RBI, the lack of clarity on how banks and other service providers are to act in the interim, till the regulator takes a final stand, led to ambiguity and reluctance in servicing the crypto industry.
"This is what the notification now clarifies, bringing some welcome interim clarity on how banks and other service providers can act," Regidi said.
Avinash Shekhar, Co-CEO at ZebPay, also welcomed the step and said that investing in crypto has always been 100 percent legal in India and the new RBI circular clearly confirms the right to do business with crypto firms.
"This will make crypto investments accessible to more Indian investors,” he said.
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